VALIDATION REPORT. KKK Hydro Power Limited Baragran Hydro Electric Project, 3.0 MW (being expanded to 4.9 MW)

Transcription

1 VALIDATION REPORT KKK Hydro Power Limited Baragran Hydro Electric Project, 3.0 MW (being expanded to 4.9 MW) SGS Climate Change Programme SGS United Kingdom Ltd SGS House London Road Camberley Surrey GU15 3E United Kingdom SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

2 Date of issue: Project No.: Project title Organisational unit: Baragran Hydro Electric Project, 3.0 SGS Climate Change Programme MW (being expanded to 4.9 MW) Revision number Client: 3 KKK Hydro Power Limited Summary SGS India Pvt. Ltd., an affiliate of SGS United Kingdom Ltd. has made a validation of the CDM project activity Baragran Hydro Electric Project, 3.0 MW (being expanded to 4.9 MW) by KKK Hydro Power Limited, on the basis of UNFCCC criteria for the CDM, as well as criteria given to provide for consistent project operations, monitoring and reporting. UNFCCC criteria refer to Article 12 of the Kyoto Protocol, the CDM rules and modalities and the subsequent decisions by the CDM Executive Board, as well as the host country criteria. The scope of validation is the independent and objective review of the project design document, baseline study and monitoring plan and other relevant documents of the project. The information in this document is reviewed against the criteria defined in the Marrakech Accords (Decision 17) and the Kyoto Protocol (Article 12) and subsequent guidance from the CDM Executive Board. The validation is not meant to provide any consulting towards the Client. However, stated requests for clarifications plan and/or corrective actions may provide input for improvement of the project design document (PDD). The overall validation process, from Contract Review to Validation Report & Opinion, was conducted using internal procedures (UK.PP.12 issue 3 dated 19/01/2007). The first output of the validation process is a list of Corrective Actions Requests and New Information Requests (CAR and NIR), presented in Annex 2 of this document. Taking into account this output, the project proponent revised its project design document. In summary, it is SGS s opinion that the proposed CDM project activity correctly applies the baseline and monitoring methodology as mentioned in approved methodology adopted for the proposed project activity and meets the relevant UNFCCC requirements for the CDM and the relevant host country criteria. Subject.: CDM validation Work carried out by Mr. Pankaj Mohan Lead Assessor Mr. Ajoy Gupta Local Assessor Indexing terms Technical review Ms. Irma Lubrecht Authorized signatory Siddharth adav No distribution without permission from the Client or responsible organisational unit Limited distribution Date of final decision: Number of pages: 17 Unrestricted distribution SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

3 Abbreviations CAR Corrective Action Request CDM Clean Development Mechanism CEA Central Electricity Authority CER Certified Emission Reductions CO 2 Carbon Dioxide DNA Designated National Authority DOE Designated Operational Entity DR Document Review EIA Environment Impact Assessment GHG Green House Gas(es) HPSEB Himachal Pradesh State Electricity Board I Interview IPCC Intergovernmental Panel on Climate Change IREDA Indian Renewable Energy Development Agency Limited ISHC International Stakeholder Consultation kwh Kilo watt hour MNES Ministry of Non Conventional Energy Sources MoEF Ministry of Environment and Forest, Govt. of India MoV Means of Verification MP Monitoring Plan MWh Mega watt hour MT Metric Tonne NIR New Information Request PDD Project Design Document PPA Power Purchase Agreement UNFCCC United Nations Framework Convention for Climate Change SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

4 Table of content 1. Introduction Objective Scope GHG Project Description The names and roles of the validation team members Methodology Review of CDM-PDD and additional documentation Use of the validation protocol Findings Internal quality control Determination Findings Participation requirements Baseline selection and additionality Application of Baseline methodology and calculation of emission factors Application of Monitoring methodology and Monitoring Plan Project design Environmental Impacts Local stakeholder comments Comments by Parties, Stakeholders and NGOs Description of how and when the PDD was made publicly available Compilation of all comments received Explanation of how comments have been taken into account Validation opinion List of persons interviewed Document references...17 Annex 1: Local assessment Annex 2: Validation Protocol Annex 3: Overview of findings Annex 4: Statement of Competence of Validation Team SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

5 1. Introduction 1.1 Objective KKK Hydro Power Limited has commissioned SGS to perform the validation of the project: Baragran Hydro Electric Project, 3.0 MW (being expanded to 4.9 MW) by with regard to the relevant requirements for CDM project activities. The purpose of a validation is to have an independent third party assess the project design. In particular, the project's baseline, the monitoring plan (MP) and the project s compliance with relevant UNFCCC and host country criteria are validated in order to confirm that the project design as documented is sound and reasonable and meets the stated requirements and identified criteria. Validation is seen as necessary to provide assurance to stakeholders of the quality of the project and its intended generation of Certified Emission Reduction (CER). UNFCCC criteria refer to the Kyoto Protocol criteria and the CDM rules and modalities and related decisions by the COP/MOP and the CDM Executive Board. 1.2 Scope The scope of the validation is defined as an independent and objective review of the project design document, the project s baseline study and monitoring plan and other relevant documents. The information in these documents is reviewed against Kyoto Protocol requirements, UNFCCC rules and associated interpretations. SGS has employed a risk-based approach in the validation, focusing on the identification of significant risks for project implementation and the generation of CERs. The validation is not meant to provide any consulting towards the Client. However, stated requests for clarifications and/or corrective actions may provide input for improvement of the project design. 1.3 GHG Project Description The objective of the project activity is to harness renewable energy in the form of hydro potential for supplying power to the state grid. The project activity involves setting up of total 4.9 MW (3 MW MW) run-of-the-river small hydro power project to export clean power to Himachal Pradesh State Electricity Board (HPSEB) grid, part of Northern Regional grid of India. Baseline Scenario: Under the baseline scenario, the project activity thus displaces equivalent amount of electricity from northern regional grid system which is predominantly generated from thermal (fossil fuel based) power plants. With Project Scenario: The project activity uses hydro energy for generation of power, which in turn contributes to conservation of fossil fuel, a non-renewable natural resource and also reduces GHG emissions. Leakage: As per the methodology AMS-I.D version 11, EB 31; the energy generating equipment(s) is not transferred from another activity, thus no leakage has to be considered. Environmental & Social Impacts: According to local assessor, there is no negative environmental and social impact expected due to the project activity. SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

6 1.4 The names and roles of the validation team members Name Affiliate Role Pankaj Mohan SGS India Team Leader / Lead Assessor Ajoy Gupta SGS India Local Assessor Irma Lubrecht SGS Netherlands Technical reviewer SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

7 2. Methodology 2.1 Review of CDM-PDD and additional documentation The validation is performed primarily as a document review of the publicly available project documents. The assessment is performed by trained assessors using a validation protocol. A site visit is usually required to verify assumptions in the baseline. Additional information can be required to complete the validation, which may be obtained from public sources or through telephone and face-to-face interviews with key stakeholders (including the project developers and Government and NGO representatives in the host country). These may be undertaken by the local SGS affiliate. The results of this local assessment are summarized in Annex 1 to this report. 2.2 Use of the validation protocol The validation protocol used for the assessment is partly based on the templates of the IETA / World Bank Validation and Verification Manual and partly on the experience of SGS with the validation of CDM projects. It serves the following purposes: it organises, details and clarifies the requirements the project is expected to meet; and it documents both how a particular requirement has been validated and the result of the validation. The validation protocol consists of several tables. The different columns in these tables are described below. Checklist Question Means of verification (MoV) Comment Draft and/or Final usion The various requirements are linked to checklist questions the project should meet. Explains how conformance with the checklist question is investigated. Examples of means of verification are document review (DR) or interview (I). N/A means not applicable. The section is used to elaborate and discuss the checklist question and/or the conformance to the question. It is further used to explain the conclusions reached. This is either acceptable based on evidence provided (), or a Corrective Action Request (CAR) due to non-compliance with the checklist question (See below). New Information Request (NIR) is used when the validation team has identified a need for further clarification. The completed validation protocol for this project is attached as Annex 2 to this report 2.3 Findings As an outcome of the validation process, the team can raise different types of findings In general, where insufficient or inaccurate information is available and clarification or new information is required the Assessor shall raise a New Information Request (NIR) specifying what additional information is required. Where a non-conformance arises the Assessor shall raise a Corrective Action Request (CAR). A CAR is issued, where: I. mistakes have been made with a direct influence on project results; 7/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

8 II. validation protocol requirements have not been met; or III. there is a risk that the project would not be accepted as a CDM project or that emission reductions will not be verified. The validation process may be halted until this information has been made available to the assessors satisfaction. Failure to address a NIR may result in a CAR. Information or clarifications provided as a result of an NIR may also lead to a CAR. Observations may be raised which are for the benefit of future projects and future verification or validation actors. These have no impact upon the completion of the validation or verification activity. Corrective Action Requests and New Information Requests are raised in the draft validation protocol and detailed in a separate form (Annex 3). In this form, the Project Developer is given the opportunity to close outstanding CARs and respond to NIRs and Observations. 2.4 Internal quality control Following the completion of the assessment process and a recommendation by the Assessment team, all documentation will be forwarded to a Technical Reviewer. The task of the Technical Reviewer is to check that all procedures have been followed and all conclusions are justified. The Technical Reviewer will either accept or reject the recommendation made by the assessment team. SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

9 3. Determination Findings 3.1 Participation requirements The Host Party for this project is India. India has ratified the Kyoto protocol on 26th Aug A Letter of Approval was missing so CAR 01 was raised. The project proponent provided the letter dated 3 rd April 2007; issued by the Indian DNA (F.No. 4/23/2006-CCC) which was verified from the original copy. The original is scanned and attached herewith. Hence CAR 01 was closed out. No Annex I Party has been identified in the PDD and the same also has been verified by cross checking the project investment details and loan sanction letters from IREDA therefore no further Letter of Approval was available. It is observed that the CDM EB has agreed that the registration of a CDM project activity can take place without an Annex I Party being involved at the stage of registration although it should be noted that before CER can be transferred to an Annex I Party, a Letter of Approval will need to be submitted. 3.2 Baseline selection and additionality The baseline selected by the project proponent was the most likely baseline scenario. Now, the project has applied baseline as mentioned in the small scale methodology AMS-I.D version 11, EB 31; as per the CDM project activities. The project proponent has considered the carbon intensive fossil fuel based thermal power generation scenario of the northern regional grid of India as the most likely baseline scenario for the project activity. The additionality issues of the project activity was not clear, the additionality issues in PDD version 01 have not been addressed the basis of investment barrier towards the project activity and the issue of barrier due to prevailing practice was not well documented with reference to the proper statistical justification thus CAR 11 was raised. As a reply to the CAR 11, project proponent has explained that additionality of the project was assessed using the barrier associated to the project capital investment due to risk due to low return on investment as the sole source of project revenue is the revenue through power selling to the state grid system and in accordance to the power purchase agreement signed with Himachal Pradesh State Electricity Board the power tariff for the net power evacuation has been fixed at the rate of only INR 2.5 per unit for 30 years and the rate will not be changed in any circumstances. Project proponent has explained all the project investment related issues and submitted copies all the supporting documentation related to project capital investment and Power Purchase Agreement (PPA) signed with Himachal Pradesh State Electricity Board. The project capital cost involvement has been verified with reference to the loan assistance letter from Indian Renewable Energy Development Agency Ltd. dated 20 th December 2000 for 3 MW component, term loan sanction letter from Canara Bank dated 21 st December 2004 and the letter from Indian Renewable Energy Development Agency Ltd. dated 18 th July 2006 towards loan assistance for the upcoming 1.9 MW component of the project activity, which were found transparent. The terms and conditions for power evacuation to the State Grid system has been verified with the relevant section (Article 6, pp 15) of PPA signed with Himachal Pradesh State Electricity Board and found satisfactory. To establish the project investment risk due to low return on investment, the project proponent has provided the detail Internal Rate of Return (IRR) calculation along with Chartered Accountant certificate dated 2 nd July 2007, showing project IRR without considering CDM benefit is 12.19% and project IRR 9/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

10 considering CDM benefit is 16.11% of total 4.9 MW (current 3 MW and future 1.9 MW) with all relevant reference and explanation towards the benchmark value of 16% on project investment. The issue of low return on project investment with reference to the 16 % benchmark value has been judged through the project IRR calculation sheet and the corresponding expected project revenue calculation during the project period has been verified with reference to the Chartered Accountant certificate as the Chartered Accountants are the statutory auditing and certifying authority as per the India Company Act (The Chartered Accountants are governed by ICAI, Institute of Chartered Accountants of India, a statutory body established under Chartered Accountants Act 1949.), thus their certification has been taken into consideration while checking transparency of the project IRR values. The project IRR values with and without CDM benefit has been included in the final version (version 4) of the PDD and the benchmark return of 16 % on investment for the project activity for Indian power projects has been cross checked with reference to the Articles /19/ Energywatch India's Power Sector: On the way of Reforms and Stanford-CMU Indian Power Sector Reform Studies by Dr. Rahul Tongia, Carnegie Mellon University, February 4, 2003 as provided by the project proponent. The fact benchmark return of 16 % on investment for the project activity as all the power projects in India are considered viable only if the guaranteed returns of minimum 16% on the capital are ensured, is clearly indicated in the above mentioned articles, which was found satisfactory and thus accepted. As the supporting towards the barrier due to prevailing practice, project proponent has provided the detailed explanation with the help of references from Ministry of Power, Govt. of India, Central Electricity Authority and Ministry of New & Renewable Energy, Government of India to establish that the development of private sector small hydro power project is not a common scenario in northern region of India and as well as in Himachal Pradesh. All the references from Ministry of Power, Government of India, Central Electricity Authority and Ministry of New & Renewable Energy, Government of India has been cross checked and found justified. The Copies of all relevant documentary evidences such as Central Electricity Authority, Annual Report Chapter 5 Ministry of New & Renewable Energy Sources, Annual Report , Chapter 9 and datasheet from Ministry of Power have been obtained from the project proponent as the supporting documents. The resolution /3/ taken by the management board of the company dated 15 th July 2000 for initial 3 MW project capacity, 23 rd April 2004 for upcoming 1.9 MW capacity addition and 18 th August 2004 for total possible expanded capacity of 4.9 MW (3 MW MW) were also provided for the project activity and that reflects, the project proponent has taken the resolution to consider CDM modalities for overcoming the associated barriers during project inception phase. This was also cross verified by interviewing the Director on the Board of the company, Company Secretary for KKK Hydro Power Ltd. and Plant manager of the industry. As in absence of the project activity, the most plausible baseline for project activity has been considered as the equal amount of power generation through northern regional grid connected thermal power generation facilities, the carbon intensity of the northern regional grid has been cross checked with reference to the emission factor (Combined Margin calculated according to the guidelines of ACM0002) value from CO 2 Baseline Database version 2.0 provided by Central Electricity Authority, Ministry of Power, Government of India; which is 0.80 tco 2 per MWh generation. Thus, With reference to the carbon intensity of the northern regional grid it is quite justified that, in absence of the project activity due to the investment barrier due to high project investment and risk associated with low return on investment, the generation of total 4.9 MW power through large thermal power generation facilities connected to the northern regional grid at the baseline would have led to higher GHG emissions, which is in line with the Attachment A to Appendix B of the simplified modalities and procedures for smallscale CDM project activities. Based on the findings above, it was concluded that the project activity was not a likely baseline scenario and hence additional to any that would occur in absence of project activity. All further relevant SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

11 justification has been incorporated in the final project design document (version 04) which were found justified. Thus CAR 11 was closed out. 3.3 Application of Baseline methodology and calculation of emission factors The proposed CDM project activity is the power generation using hydro power and uses baseline methodology as described under AMS-I.D version 11, EB 31 as per small scale CDM project activities. The detailed calculation worksheet for grid emission factor was not available for cross checking the calculation for grid emission factor and the traceability of data used during the calculation, thus a NIR 09 was raised asking for a full reference. In response to the NIR 09, the project developer explained the value used for the OM, BM and Combined Margin for grid emission factor has been sourced from the national standard value of northern regional grid as provided by Central Electricity Authority, Ministry of Power, Government of India and provided the full reference of the Baseline Carbon Dioxide Emission Database Version 2.0 and the same has been incorporated in the revised version 4 of the PDD. The project proponent has also provided the emission reduction calculation excel sheets to verify all data and basis of the baseline emissions reduction calculation. The reference and source of the grid emission factor value applied for the emission reductions and the energy generation figures of 3 MW, 1.9 MW and total 4.9 MW as provided under section A.4.3 of the version 02 of the PDD were not clear and satisfactory, along with those some inconsistency were found in the emission reduction calculation spreadsheet. Thus further clarification was asked from the project proponent regarding the same, as the response project proponent has provided the revised emission reduction calculation worksheet including all the relevant references towards applied grid emission factor and energy generation figures with reference to the Detailed Project report and the inconsistency in calculation were also rectified and same has been incorporated in version 4 of the PDD. All the calculation has been checked by the local assessor and found that the baseline emission factors are calculated in accordance with the methodology and the Operating Margin Grid emission factor 0.80 tco 2 per MWh which has been determined Ex-ante and is fixed for the entire crediting period. Hence, NIR 09 was closed out. The consideration of leakage calculation for the project activity, as mentioned in the version 01 of the PDD was verified with reference to the contract agreement signed between project proponent and equipment supplier and found satisfactory to accept that the project activity does not involve any transfer of equipment from another activity, along with that the issue of the project activity is not a debundled component of a larger project activity and neither is a project activity registered nor there is an application to register another small scale CDM project activity from the same project participant in same project category, registered within the previous 2 years and whose project boundary is within 1 km of project boundary of the proposed small scale activity has been verified with reference to the CDM project list provided by UNEP Risø Centre CDM Pipeline overview list dated 31-May-07 1 and the ground reality has been also crosschecked by the local assessor during site visit. The copy of the contract agreement with equipment supplier has been obtained. The fact regarding the leakage calculation has been found in line with the methodology AMS-I.D version 11, EB Application of Monitoring methodology and Monitoring Plan The present CDM project activity uses monitoring methodology as described in AMS-I.D version 11, EB 31 as per small scale CDM project activities. CAR 13 was raised as the monitoring plan mentioned in the PDD version 01, was not clear on the significance of data variable Energy Imported, energy meter type, metering location and calibration procedure, QA/QC procedures undertaken and operational and management structure that the project /49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

12 proponent will implement in order to monitor emission reductions and clear indication regarding the roles and responsibilities for data collection and archiving. The project proponent in their response explained the data variable Energy Imported as a significant one as the project activity is importing a small amount of electricity from the state electricity grid during the lean period or during the inconsistency in power generation for meeting up the auxiliary power requirement for the power generating equipments and that is important in calculation of net electricity exported to the grid system by the project activity, which ultimately depends for calculation of emission reduction by the project activity. The parameters needed to calculate net energy exported are energy imported and energy exported to the grid, the electricity imported parameter is subtracted from gross electricity exported parameter to calculate net electricity exported or supplied to the grid system and which are reflected in Power invoices for net electricity export to State grid system and joint meter reading reports. The energy import from the grid is being metered at the interconnection point and adjusted against the Net Saleable Energy in corresponding month s bill, which was found in line with the terms and condition mentioned in the Power Purchase Agreement signed between project proponent and Himachal Pradesh State Electricity Board. The project proponent has provided the copies of energy bills and joint meter reading reports as the supporting to the monitoring procedure of net electricity exported and electricity imported, the copies of energy bills and joint meter reading reports for last six months and the power purchase agreement signed with Himachal Pradesh State Electricity Board has been obtained and verified to be acceptable. The project proponent has provided the detail technical specifications of the check and main energy meters being used for monitoring net electricity exported and electricity imported from the state grid system, which are installed at the nearest grid substation and were cross-checked physically by the validator during site visit. The calibration certificates of the main and check meter were also submitted by the project proponent. The copies of energy meter calibration certificates (Meter #1: serial no , date of calibration: 16 th Oct, 2006; Meter#2: serial no , date of calibration: 16 th Oct, 2006; calibration done by Power Grid Corporation of India Ltd., A Govt. of India Enterprise, Regional Test Laboratory, Northern Region II, Jalandhar) have been obtained and verified to be satisfactory. The project proponent has made all necessary corrections required and all the necessary parameters have been included in the monitoring plan given in the rephrased PDD version 4. All the further incorporation has been checked in final (version 4) of the PDD, which were found justified and that was accepted hence CAR 13 was closed out. NIR 07 was raised as there was no indication regarding any initial training provided to the project personnel, towards effective operation of the project activity. In response to NIR 07, the project proponent has provided documentary evidence towards the initial training to the technical staff of the project activity provided by the equipment supplier for effective operation of the project activity. The copy of the document (letter from equipment supplier Boving Fouress Limited, dated 15 th October, 2004) was procured from the project proponent and verified. Thus NIR 07 was closed out. 3.5 Project design The rephrased Project Design Document (PDD) version 04 dated 28-July-07 was designed as per version 4 of guidelines laid for preparing PDD of small scale CDM project activity hence the format of the present PDD was checked against it. CAR 05 was raised due to some substantive issues in the web-hosted version of the PDD, as Section A.1 of the PDD, current version number of the document and the date when the document was completed has not been described, under sub-section A.4. technical description of the project activity has not been described, the version of the methodology used in the sub-section B.1. and D.1. of the SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

13 PDD has not been provided and description under section E.1.2 in the PDD is absent. In response to the CAR 05 project proponent has rectified all the substantive issues in the revised version of the PDD, all the incorporation in the final (version 04) of the PDD which was found satisfactory, thus CAR 05 was closed out. There was no clear indication of the assurance that the project technology will not be substituted by other or more efficient technologies, within the project crediting period. To get the clarification regarding the same a NIR 06 was raised. In response to the NIR 06, project proponent provided a self explanatory letter towards the implemented technology by the project activity will not be changed or replaced by any improved technology during the crediting period of the project activity. This is accepted as assurance from PP and Hence, NIR 06 was closed out. The exact starting date of the project activity was not clear in the version 01 of the PDD, thus, a CAR 08 was raised, in response to the CAR 08, the proponent explained that the project start date for the 3 MW component was 5 th August, 2004 and the same had been configured in accordance with the date of the commercial operation date of the project activity, as confirmed by the letter no. HPSEB/PHE/BARAGRAN/ , dated 23rd August 2004 from Himachal Pradesh State Electricity Board. The copy of the letter from Himachal Pradesh State Electricity Board regarding commercial operation date of the project activity has been obtained and verified with the original copy. The exact project start date has been incorporated in the revised version of the PDD. The 1.9 MW component among the total 4.9 MW installed capacity of the project activity is a future project and yet to be installed, the start date of the 1.9 MW component has been configured as 20 th June 2006 in accordance with the date on which it has received Techno-Economic clearance from Himachal Pradesh State Electricity Board. It was expected by the project proponent that the 1.9 MW component will be commercially operational sometime in the month of July, 2007 or later, so the exact start date of the commercial operation of the 1.9 MW component of the project activity should be cross checked during the verification stage. Hence, CAR 08 was closed out. To get more transparent idea about the description of the project boundary as given in the web-hosted version of the PDD, a NIR 12 was raised. In response to that, the project proponent provided a copy of the general layout diagram of the project activity and same has been included in the final PDD version 4, the extent and component of the project boundary was verified during site visit by the local assessor and the description of the project boundary found satisfactory, hence NIR 12 was closed out. 3.6 Environmental Impacts NIR 10 was raised as there was no clarification regarding the requirement of EIA study, under the Host Country legislative requirement has been provided with the web hosted version of the PDD and the relevance regarding the term Environmental Statement mentioned in the section F of the PDD version 1, was not clear as periodic Environmental Statement in applicable cases is a legal compulsion under Environmental Protection and Pollution Prevention legislative requirement in India. In response to the NIR 10, the project proponent has provided the detailed reference of the Schedule I, entry number 2 of The EIA Notification No. S.O.60 (E), dated 27/01/1994 and the amendments made there under, according to which the present project activity does not have any compulsion to carry out any EIA study, and the project proponent also declared the unintended occurrence of term Environmental Statement in the Section F of the web-hosted version of the PDD due to typographical error. The fact has been verified and a copy of the applicable Host Country legislation has been obtained from the project proponent, the required rectifications have been made in the final version (version 4) of the PDD, which was found satisfactory. Hence, NIR 10 was closed out. 3.7 Local stakeholder comments The local stakeholder consultation process mentioned in the PDD version 01 does not provided any 13/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

14 clear impression about the media used to invite local stake holder comments, the detail modalities and procedure of LSC meeting and the summary of comments received by stakeholder consultation process. Thus, NIR 02 to NIR 04 was raised to get clarification regarding the same. The local stakeholders consulted for the project activity are the designated representatives of the local community, Himachal Pradesh State Pollution Control Board, Himachal Pradesh State Electricity Board, Department of Forests, Government of Himachal Pradesh equipment suppliers etc. The local stakeholder consultation meeting was organised on 5th November 2006, at 11:00 am, the venue was Hilltone Resorts in tehsil Manali, District Kullu of State Himachal Pradesh, India. In response to the NIR 02, the project proponent has provided the public notice published on 28 th October 2006, a week before the LSC meeting in the local news paper in vernacular language of the local community. The paper cutting of the public notice has been procured from the project proponent and verified, which was found satisfactory, hence NIR 02 was closed out. The project proponent has provided the detailed minutes along with the copies of complete attendance list and the general comments received during the local stakeholder consultation meeting in response to the NIR 03 and NIR 04. The project proponent also provided the copies of Clearances from Himachal Pradesh State Pollution Control Board, Power Purchase agreement with Himachal Pradesh State Electricity Board, NOC from local village community of village Baragran and Hallan, Clearance and NOC from Department of Forest, Govt. of Himachal Pradesh, Approval from Public Works Department, Govt. of Himachal Pradesh for pipeline, NOC from Town and Country Planning Department, Govt. of Himachal Pradesh, NOC from I & PH Department, Govt. of Himachal Pradesh, to establish the transparency in local stakeholder process, the copy of the documents has been obtained and were duly verified with the original copies and found satisfactory towards the transparency of Local Stakeholder Consultation process, thus NIR 03 and 04 was closed out. 4. Comments by Parties, Stakeholders and NGOs In accordance with sub-paragraphs 40 (b) and (c) of the CDM modalities and procedures, the project design document of a proposed CDM project activity shall be made publicly available and the DOE shall invite comments on the validation requirements from Parties, stakeholders and UNFCCC accredited non-governmental organizations and make them publicly available. This chapter describes this process for this project. 4.1 Description of how and when the PDD was made publicly available The PDD and the monitoring plan for this project were made available on the UNFCCC CDM website through SGS Climate Change webpage and were open for comments from 9 th January 2007 to 9 th February Comments were invited through the UNFCCC CDM homepage. 4.2 Compilation of all comments received The project was up loaded for International stakeholder consultation (ISHC) for a period of 30 days and received no comments. 4.3 Explanation of how comments have been taken into account No comment received. 5. Validation opinion SGS has performed a validation of the project: Baragran Hydro Electric Project, 3.0 MW (being 14/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

15 expanded to 4.9 MW), by KKK Hydro Power Limited. The Validation was performed on the basis of the UNFCCC criteria and host country criteria, as well as criteria given to provide for consistent project operations, monitoring and reporting. Using a risk based approach, the review of the project design documentation and the subsequent follow-up interviews have provided SGS with sufficient evidence to determine the fulfilment of the stated criteria. In our opinion, the project meets all relevant UNFCCC requirements for the CDM and all relevant host country criteria. The project will hence be recommended by SGS for registration with the UNFCCC. Using a risk based approach, the review of the project design documentation and the subsequent follow-up interviews have provided SGS with sufficient evidence to determine the fulfilment of the stated criteria. In our opinion, the project meets all relevant UNFCCC requirements for the CDM and all relevant host country criteria. The project will hence be recommended by SGS for registration with the UNFCCC. SGS has received confirmation by the host Party that the project activity assists it in achieving sustainable development. By utilizing the renewable hydropower for generation of electricity, the project results in reductions of greenhouse gas emissions that are real, measurable and give long-term benefits to the mitigation of climate change. A review of the investment barrier and other associated barriers with prevailing practice demonstrates that the proposed project activity is not a likely baseline scenario. Emission reductions attributable to the project are hence additional to any that would occur in the absence of the project activity. The initial 3 MW component of the project activity is already implemented and the latter 1.9 MW component is underway and hence the project activity is likely to achieve the estimated amount of emission reductions. The validation is based on the information made available to SGS and the engagement conditions detailed in the report. The validation has been performed using a risk based approach as described above. The only purpose of this report is its use during the registration process as part of the CDM project cycle. Hence SGS can not be held liable by any party for decisions made or not made based on the validation opinion, which will go beyond that purpose. The DOE declares herewith that in undertaking the validation of this proposed CDM project activity it has no financial interest related to the proposed CDM project activity and that undertaking such a validation does not constitute a conflict of interest which is incompatible with the role of a DOE under the CDM. SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

16 6. List of persons interviewed Date Name Position Short description of subject discussed Mr. L.D. Bhatia Plant Manager Project proponents view on CDM project activity, baseline and data monitoring for project activity, technical description of the project activity, monitoring plan and reporting procedure Mr. O.P. Sharma Mech. Engineer Project instrumentation and monitoring equipment details Mr. Kuldeep Vats Sr. Accounts Officer Project financial information such as, project funding, debt-equity ratio, project cost sheet etc Mr. Naresh Negi Fitter Project instrumentation and general awareness of the project activity Mr. Naresh Thakur Local resident Awareness towards the project activity and type and extent of socio- economic and environmental well being by the project activity Mr. Vivek Kumar Local resident Awareness towards the project activity and type and extent of socio- economic and environmental well being by the project activity. SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

17 7 Document references Category 1 Documents (documents provided by the Client that relate directly to the GHG components of the project, (i.e. the CDM Project Design Document, confirmation by the host Party on contribution to sustainable development and written approval of voluntary participation from the designated national authority): /1/ PDD version 1 (web hosted) /2/ PDD version 2 dated /3/ PDD version 3 dated /4/ PDD version 4 dated (Current) /5/ Letter of Approval from Indian DNA dated 3rd April 2007 /6/ Modalities of communication Category 2 Documents (background documents used to check project assumptions and confirm the validity of information given in the Category 1 documents and in validation interviews): SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

18 /1/ PPA between Himachal State Electricity Board and KKK Hydro Power Ltd. for power evacuation to the state grid system. /2/ Project IRR calculation sheet with Chartered Accountant certificate /3/ Board meeting minute documents regarding CDM consideration dated 15 th July 2000, 23 rd April 2004 and 18 th August 2004 /4/ Loan sanction from IREDA for 3 MW component /5/ Loan sanction letter from Canara Bank /6/ Communication from IREDA regarding loan assistance for 1.9 MW component /7/ Public notice in the local newspaper for LSC meeting dated 28th October /8/ Local Stakeholder Consultation meeting minutes dated 5 th November /9/ Documentary evidence towards initial training from equipment supplier. /10/ NOC from Himachal Pradesh State Pollution Control Board. /11/ NOC from local village community. /12/ Approval from Public Works Department, Govt. of Himachal Pradesh. /13/ NOC from Town and Country Planning Department, Govt. of Himachal Pradesh. /14/ NOC from I & PH Department, Govt. of Himachal Pradesh /15/ Power invoices for net electricity export to State grid system and joint meter reading reports. /16/ Calibration certificates of energy meter. /17/ Proof of project start date (letter of commercial operation start date for 3 MW from Himachal Pradesh State Electricity Board dated 23rd August 2004 & Techno-Economic Clearance for 1.9 MW from Himachal Pradesh State Electricity Board dated 20th June 2006) /18/ Undertaking document for non-replacement of he implemented technology during the entire span of crediting period. /19/ Benchmark return on investment for the project activity Article 1 - Energywatch India's Power Sector: On the way of Reforms (Available at: Article 2 - Stanford-CMU Indian Power Sector Reform Studies by Dr. Rahul Tongia (Carnegie Mellon University; tongia@andrew.cmu.edu.), February 4, 2003 (Available at: /20/ AMS-I.D version 11, EB 31 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0) /49

19 Annex 1 Local assessment checklist TABLE 12 ADDITIONAL INFORMATION TO BE VERIFIED B LOCAL ASSESSORS / SITE VISIT CHECKLIST QUESTION Ref. MoV* COMMENTS 1. Whether CDM modalities has been considered during the planning stage of the 3 MW project. 2. Whether the project activity has the positive contribution towards direct and indirect socio-economic and environmental well being. 3. Whether the project activity is implementing state-of-the art technology and the project design engineering reflects current good practices. PDD DR/I Project proponent submitted the MOM of board resolution which were also verified by seeing the original copy and also interviewing the Plant Manager. PDD I During site visit, the interview of the employees and local stakeholders has reavealed that the project activity has generated direct or indirect employement opportunity for the local community and down stream bussiness opportunities for the local businessmen and the project activity does no have any negetive impact towards the surrounding environment. PDD DR A copy of detailed offer made by the equipment supplier is obtained and verified with the original copy. Draft Final 19/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

20 CHECKLIST QUESTION Ref. MoV* COMMENTS 4. The regulatory approval (consent to establish and operate the project) from the State Pollution Control Board is required to verify that local/legal requirements have been met. PDD DR The copy of consent to operate letter for 3 MW component from State Pollution Control Board has been obtained and checked with original consent. It was found to be satisfying. As the 1.9 MW component of the project activity is a future project, the consent to operate for the same has to be checked during verification process. Draft Final 5. Power Purchase Agreement to be checked for the terms and issues associated to the power evacuation to the State Grid system. PDD DR The Power Purchase Agreement (PPA) is available only for 3 MW component of the project activity, which was signed between the project proponent and HPSEB on As the 1.9 MW component of the project activity is a future project, the PPA for the same has to be checked during verification process. 6. The status and the issues associated with the activity towards capacity addition of another 1.9 MW turbine generator. PDD DR The required regulatory clearances from the concerned authority such as, technoeconomic clearances from MNES, clearances from Public Works Department, NOC from neighbourhood villagers, essentiality certificate from DC and Letter from I & PH department, Government of Himachal Pradesh has been procured. As the 1.9 MW component of the project activity is a future project, the Forest Clearances for the same has to be checked during verification process. 20/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

21 CHECKLIST QUESTION Ref. MoV* COMMENTS 7. Whether the project activity has utilised any ODA. 8. The possibility of anykind of project emission to be checked. 9. Whether Stakeholder consultation meeting was designed in proper way to create awareness about the project activity and the comments received to be checked. 10. It is required to be checked whether the project technology used is likely to be substituted by other or more efficient technologies within the project period. PDD DR All the project investment details such as loan sanction letters from financial Instituitions have been obtained from the project proponent and it is clear that there are no such involvement of ODA in the project investment. PDD I As the project is a run-offthe-river small hydro power generation project and through checking and interviewing the respective project personnel, it has been found that the project activity does not involve combustion of any fossil fuel at any stage, thus nullifying the requirement of any project emission calculation. PDD DR/I Public notice published in the local news paper for declaration and invitation to the LSC meeting has been validated and Letter of No Objection and appreciation provided by the local village community towards NOC on project activity have been obtained to verify the transparency in the local stakeholder consultation process. PDD DR Project proponent submitted an undertaking that the project activity will not be substituted by other or more efficient technologies within the entire project crediting period. Draft Final 21/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)

22 CHECKLIST QUESTION Ref. MoV* COMMENTS 11. It is required to be checked that the Small scale project activity is not a debundled component of a larger project. 12. Whether the project activity involves any transfer of equipment(s) from another activity. 13. The designed electricity generaion figures to be cross checked. PDD I It has been checked during site visit, that the project activity is not a debundled component of a larger project. PDD DR None of the equipment of the project activity has been transferred from any other activity, a copy of the letter from equipment supplier has been obtained and verified with the original copy. PDD DR During review of Detailed Project Reports, it was found that the net electricity available from 3 MW would be MU instead of MU and for 1.9 MW the net electricity available would be 7.83 MU instead of 8.07 MU. Draft Final 14. The exact start date of the ptroject activity to be validated. PDD DR According to the HPSEB letter HPSEB/PHE/BARAGRAN/ , the comercial operation start date for 3 MW power generation is 5 th August, As the 1.9 MW component of the project activity is a future project, the commercial production date for the same has to be checked during verification process. 22/49 SGS United Kingdom Ltd SGS House, London Road, Camberley, Surrey GU15 3E Tel +44 (0) Fax +44 (0)